Even when a Fortune 500 CEO is ousted, there’s typically a golden goodbye on the way out. That doesn’t apply to former Norfolk Southern chief executive Alan Shaw, however, who the railroad company fired on Wednesday after an investigation found he and chief legal officer Nabanita C. Nag had engaged in a consensual romantic relationship, violating company policy. Norfolk terminated Shaw for cause, disqualifying him from receiving the benefits prescribed in the company’s executive severance plan.
Shaw largely weathered the storm when a Norfolk train carrying toxic chemicals famously derailed in eastern Ohio last year. Then, at the beginning of the year, he survived an activist bid to unseat him. He’s out the door now, however, and his alleged affair could prove costly.
Under Norfolk’s severance plan, Shaw would have been entitled to two times his base salary, which was $1.1 million in 2023. More importantly, he also would have been eligible for cash payments representing the full value of his restricted stock and outstanding option awards. Stock and option awards accounted for over $10 million of Shaw’s $13.4 million compensation package last year, according to the company’s latest proxy statement.
It also remains to be seen whether the company will attempt to claw back some of Shaw’s previous pay, a move that is becoming more common.
The Securities and Exchange Commission recently updated rules requiring companies to have so-called clawback policies, which enable them to recoup pay from current and former executives after a financial restatement. Recently, however, major companies—often pushed by institutional investors and proxy advisory firms—have also adopted similar measures in the event executives engage in misconduct or behaviors that cause reputational harm.
That includes Norfolk Southern, one of America’s four largest freight railroads.
When reached for comment, Norfolk Southern did not provide clarification about whether the company would attempt to claw back pay from Shaw. Shaw and Nag did not respond to requests for comment when The Wall Street Journal first reported news of their respective terminations.
RBC shows precedent for clawback fight
Another high-profile clawback fight is currently being waged by Royal Bank of Canada, with the bank attempting to recover roughly $3.2 million after firing CFO Nadine Ahn and finance executive Ken Mason. The bank claims the pair maintained an undisclosed relationship for about 10 years, a period in which RBC says Ahn pushed for promotions and pay raises for Mason.
Both Ahn and Mason have sued RBC for wrongful termination, saying they were close friends and that the investigation was mishandled.
According to data provided to Fortune from analytics firm Esgauge last month, 16 companies have attempted clawbacks from 19 executives since the start of 2023, the year the SEC’s new rules took effect.
Seven clawbacks are pending, eight resulted in payback, and two were unsuccessful. One company has not disclosed the outcome, according to Esgauge.